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Getting a car on finance is a great way to spread the cost of a car into affordable monthly payments. Finance deals can last several years and when you sign the agreement, you agree to make every payment on time and in full. But what happens if you get to a place where you don’t pay car finance back? If you can no longer afford your car finance payments, you should never ignore the problem. Your first port of call should be to contact your finance lender and see how they could help first. If you are in a position where you can’t pay your car finance back, read our guide below on what to do next. 

What happens if you don’t pay your car finance back? 

If you default on a car finance payment, the lender will usually send you an initial reminder to make the payment. Depending on the type of car finance agreement you have, you may also be charged a late payment fee. If you fail to make the payment again, you will be issued with an arrears notice of how much you owe. Until you have repaid the missed car finance payment, you will receive an arrears notice every 6 months from the lender. The lender can then escalate this issue to a court order if the payments are still not made. After the court order is issued, you have 14 days to settle the outstanding amount. If you don’t settle the finance, the lender can terminate the contract and if it’s a secured loan, they have the right to take the car off you. 

can't pay finance back

Will my car on finance be repossessed if I can’t pay? 

Your car will be at risk of being repossessed if you fail to repay your car finance. This usually happens once the payment has been escalated to a court order and if you still fail to pay off the outstanding balance. However, if you have paid off more than a third of your total amount owed, the lender can’t repossess the vehicle without a court order. If they do, you can claim compensation by going to court and requesting a time order. A time order is a court-issued order that allows you to catch up on your repayments and stop the car from being repossessed. 

I have a car on finance and can’t afford it – what do I do? 

If your car finance affordability changes and you find yourself unable to afford car finance payments anymore, you should contact your lender as soon as possible. The worst thing you can do is miss payments and ignore the problem. If you used our car finance brokerage service and aren’t sure who your lender is, simply contact us with your full name and date of birth and we can supply this information for you. 

  • StepChange – StepChange are a UK-based debt charity that provides free expert advice on what to do if you can’t afford your car finance any more. 
  • Citizens Advice – Citizens Advice is a charity that offers free and confidential advice on how to manage your debt. 

How do missed payments affect credit scores?

Missed or late car finance payments can lead to a bad credit score and affect your ability to borrow money in the future. If missed payments regularly occur, your credit score will be negatively affected. Missed payments can stay on your credit file for up to six years and can harm your ability to get approved for finance. A higher-risk candidate may also receive a higher interest rate if they do manage to get a car finance approval. Higher interest rates can make the cost of borrowing higher and make your car finance deal more expensive in the long run.